Welcome to the most recent issue of our Russian Legislation Update, covering the period of February - April 2017.

In this issue… Banking National Payment System

Banking

Banks' charters

On 28 March 2017 the President signed Federal Law No. 41-FZ amending the Law on Banks.

According to the amendments, bank charters no longer need to specify the respective bank’s address or representative office. This data is instead to be set out on the bank’s website and on the website of the Central Bank (CBR).

The amendments will enter into force on 27 June 2017.

Examination / inspection of the pledged assets

On 26 December 2016 the Bank of Russia approved Regulation No. 570-P "On the Procedure for the Central Bank Examining the Pledged Assets Accepted by the Credit Organization as Security for Loan".

The Regulation was registered with the Ministry of Justice on 24 March 2017.

According to the law, the CBR shall examine the pledged assets in order to assess the bank's assets and liabilities, including the sufficiency of provisions for loans. The Regulation sets out the procedure for examining each pledged asset, including verifying its existence, inspecting it, establishing its legal status and valuing it.

The CBR's examination is based, among other things, on the information provided by the bank. The bank is to provide the requested information within 10 business days after the request is made. Where a pledgor is a foreign company and (or) the pledged asset is located/ registered abroad, the documents with respect to the pledgor and (or) the pledged asset shall be provided in accordance with the requirements of the relevant foreign law. The foreign language documents shall be accompanied by a Russian translation.

The examination is conducted taking into account the specifics of the various types of pledged assets (immovables, securities, equipment, etc.).

The Regulation entered into force on 11 April 2017.

On 20 December 2016 the Central Bank issued Instruction No. 176-I "On the Procedure and Instances of Inspecting the Pledged Assets […] and (or) Inquiring about the Business of the Credit Organization's Borrower and (or) Pledgor by Authorized Representatives of the Bank of Russia."

The Instruction was registered with the Ministry of Justice on 13 February 2017.

According to the law, the CBR representatives are entitled to inspect the pledged assets and inquire about the borrower's and/or pledgor's business on-site. The Instruction sets out the procedure for and instances of such inspections of the pledged assets and inquiries into the borrower's / pledgor's business.

The inspection and (or) the inquiry are conducted with the following purposes: 1) to assess the sufficiency of provisions for loans, 2) to assess the quality of assets used as security for CBR loans and 3) to examine the pledged assets. They can be also conducted as part of a wider inspection of a bank.

The inspection of the pledged assets can be conducted, in particular, if there are signs that the information about the pledged assets received from the bank is not trustworthy or if there is a need to ascertain some characteristics of the pledged assets affecting their value. The inquiry about the borrower's / pledgor's business can be conducted, in particular, if the borrower / pledgor refuses to allow the inspection of the pledged assets, if the borrower / pledgor is subject to bankruptcy procedures or if there are concerns as to whether the borrower's business is "real."

The inspection and (or) the inquiry are conducted with prior notice to the bank (or in some cases without notice) in the presence of the bank's representatives or, if there is a grounded application of the bank, in their absence. If there is prior notice, the bank is obliged to inform the CBR of its readiness for the inspection / inquiry and to provide the requested documents no later than 10 business days after receiving the notice.

The bank is obliged to assist the CBR representatives in inspecting the pledged assets and inquiring about the borrower's / pledgor's business. The borrower / pledgor is also obliged to provide the required assistance (in particular, to provide access to the premises where the pledged assets are located or the borrower's business is conducted and demonstrate the good, working condition of the pledged assets).

The CBR representatives are entitled to make photos and videos during the inspection and inquiry.

The Instruction entered into force on 27 February 2017.

Reporting

On 17 November 2016 the Bank of Russia issued Directive No. 4204-U amending Directive No. 3081-U "On Disclosure by Credit Organizations of Information about Their Performance."

The Directive was registered with the Ministry of Justice on 9 January 2017.

The Directive expands the scope of information to be disclosed by banks, adding information on operations with non-resident counterparties and the encumbered and non-encumbered assets of a bank.

The Directive entered into force on 24 January 2017.

On 19 December 2016 the Bank of Russia issued Directive No. 4236-U amending Directive No. 3580-U "On Submission by Credit Organizations of Financial Statements."

The Directive was registered with the Ministry of Justice on 16 January 2017.

According to the Directive, banks are required to submit to the Bank of Russia interim financial statements for the first half of the year (starting from the first half of 2017) together with an audit report or another document prepared as a result of the audit (starting from statements for the first half of 2018).

The Directive entered into force on 3 February 2017.

On 16 January 2017 the Bank of Russia issued Directive No. 4265-U amending Directive No. 2923-U "On Disclosure and Submission by Parent Banks of Banking Groups of Consolidated Financial Statements."

The Directive was registered with the Ministry of Justice on 3 February 2017.

According to the Directive, parent banks of banking groups are required to publish interim financial statements for the first half of the year together with an audit report or another document prepared as a result of the audit.

The Directive entered into force on 10 March 2017.

On 24 November 2016 the Central Bank issued Directive No. 4212-U regarding reporting forms of credit organizations.

The Directive was registered with the Ministry of Justice on 14 December 2016.

The Directive is an updated version of Directive No. 2332-U. It amends the procedure for the preparation and submission of certain reporting forms and introduces a number of new reporting forms (the data on concentration risk, the data for calculating the amount of participation of foreign capital in the aggregate charter capital of Russian credit organizations, the data on unfulfilled transactions).

The Directive entered into force on 1 January 2017 (however, the reporting forms are to be submitted with due regard to the dates specified in the Directive, for example, the data on unfulfilled transactions is to be submitted starting from 1 September 2017).

On 27 February 2017 the Central Bank issued Directive No. 4302-U amending Directive No. 4212-U on reporting forms of credit organizations.

The Directive was registered with the Ministry of Justice on 29 March 2017.

The Directive introduces a new reporting form – including data on bank accounts, deposits of certain legal entities and letters of credit. It is required for monitoring banks which hold the funds of state-owned companies.

The Directive entered into force on 31 March 2017.

Other issues (correspondent accounts, open currency positions)

On 14 November 2016 the Bank of Russia issued Directive No. 4189-U amending Instruction No. 153-I on opening bank accounts.

The Directive was registered with the Ministry of Justice on 14 February 2017.

The Directive simplifies the procedure for opening correspondent bank accounts for foreign credit organizations. Russian banks may ask for fewer documents for the opening of a bank account for a foreign credit organization, if such foreign credit organization is incorporated in accordance with the laws of, and is located in, a foreign state that is a FATF member and is included in the register of the acting credit organizations of that state.

The Directive entered into force on 17 February 2017.

On 28 December 2016 the Central Bank adopted Instruction No. 178-I "On Establishing of Amounts (Limits) of Open Currency Positions […]."

The Instruction was registered with the Ministry of Justice on 17 March 2017.

The Instruction represents an updated version of Instruction No. 124-I. In particular, it sets out specifics of taking guarantees and suretyships into account when calculating open currency positions in cases where a guarantor/ surety is in a bad financial position.

The Instruction entered into force on 9 April 2017.

National Payment System

On 3 April 2017 the President signed Federal Law No. 59-FZ amending the Law on the National Payment System.

According to the amendments, if a foreign state introduces a ban with respect to payment systems whose operators are registered by the CBR, transfers without opening bank accounts from Russia to that foreign state will be made:

  1. via payment systems only on the condition that the payment system operator and operators of payment infrastructure services are directly or indirectly controlled by Russian legal entities; and
  2. based on agreements with foreign organizations that are not banks only on the condition that they are directly or indirectly controlled by Russian legal entities.

The information on the bans introduced by foreign states shall be published on the CBR's website.

The amendments will enter into force on 5 May 2017 and will apply to cases where the bans were introduced before that.

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